Nonprofit leader sees high-tech innovation as economic driver

Washington — The U.S. economy is sickly, suffering from too much debt, stagnating wages and slow growth.

So this campaign season, presidential and congressional candidates will be promoting cures such as cutting taxes or increasing infrastructure spending to create jobs.

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RICK MCKAY/Cox Washington Bureau

Rob Atkinson believes in ‘innovation economics’ and is trying to persuade policy-makers to support more funding and tax incentives for advanced technology, research and development.

How 20th century.

To Rob Atkinson, the old ideas about lowering taxes or creating road-paving jobs are just that — old. For the 21st century, Atkinson argues, America needs new policies that recognize the central role that advanced technologies play in spurring growth.

He calls this approach “innovation economics,” and he’s on a campaign to convert policy-makers by showing them how new technologies can turbocharge growth.

“Innovation is what is driving growth, and there are policies one could employ to support innovation,” said Atkinson, president of the Information Technology and Innovation Foundation, a nonprofit research group created in 2006 by donors who support his agenda.

Atkinson says government should be using tax incentives and more spending to spur research and development, generate new patents and turn out more science and engineering graduates. Research done by educated Americans can result in inventions that generate jobs and profits, he argues. From 1980 to 2001, all of the net growth in U.S. jobs came from firms less than 5 years old, while older companies actually lost jobs, he says.

Unfortunately, in the capital of the world’s largest economy, “the ‘priesthood’ opposes these policies,” Atkinson said. Here, political leaders are split into three groups generally known as supply siders, Keynesians and “Rubinomics” supporters, he said.

Republicans typically are supply siders, who say government should cut taxes to increase incentives for people to supply more goods and services. Former President Ronald Reagan remains the patron saint of these believers.

Democrats favor the ideas of deceased British economist John Maynard Keynes, who helped shape New Deal policies in the 1930s. He argued that government should spend money and cut interest rates during recessions to stimulate growth.

The third group supports policies championed by Robert Rubin, who was former President Bill Clinton’s Treasury secretary from 1995 to 1999. Rubin believes Congress should shrink the federal deficit to discourage inflation and keep savings flowing into the stock market instead of government securities.

Atkinson says lower taxes, new bridges and balanced budgets might be nice, but they won’t make Americans richer. To upgrade our living standard, he says, government must support technological innovation. For example, government spending led to the invention of the mainframe computer and the Internet, he noted.

“The way you drive innovation is when the public and private sectors work together,” he said. “An R&D tax credit does distort the economy, but the growth vastly outweighs the costs.”

Today, the idea that real growth comes only from technology might well be disputed by, say, home builders who think our economic problems stem from the housing sector’s free fall.

They would argue that tax credits for home buyers and tax cuts for builders would bolster the industry. Government spending on new roads would improve the job market and provide better access to new housing subdivisions. A balanced budget would encourage capital to shift from government securities to mortgage securities.

Together, such policies would revive housing, and as everyone knows, buying a house is a great investment for the average American, the builders argue.

“I’m sorry, but those ideas are just black magic,” Atkinson says.

“Housing is just amortized consumption,” he said. “It’s not an investment.”

Pouring too much money into housing from 1995 to 2005 led to today’s poor economy, he said. “We threw in money, and out came houses, but we didn’t get any growth,” he said.

Alex Brill, an economist at the American Enterprise Institute, a conservative think tank, believes government would do more to help innovation by cutting taxes. “You don’t want to reduce the rewards from innovation by increasing public spending” in ways that might raise taxes, he said.

Atkinson has been fighting such arguments for years, formerly as vice president of another think tank, the Progressive Policy Institute.

In the early 1990s, he served as a project director at the now defunct congressional Office of Technology Assessment, where he examined the impact of technology on cities.

While many of Atkinson’s ideas do sound good to political leaders, they get little traction in Washington. That’s because Realtors, builders and restaurant owners greatly outnumber computer engineers, he said. “Dell doesn’t have a plant everywhere, but the Realtors have hundreds of members in every district,” he said.

So his think tank’s six wonks will continue cranking out studies and lectures to try to persuade policy-makers. His funding comes from technology companies, wealthy individuals and foundations.

On Sept. 25, they are inviting congressional staffers and journalists to a forum titled, “Innovation Economics for the Next Administration.”

He is confident he will wear down lawmakers with his logic and statistics. “Ideas matter,” he said. “If these members of Congress had a full understanding of innovation economics, they would think differently.”

FOUR APPROACHES TO ECONOMIC POLICY

• Keynesian: Increase government spending, cut taxes and reduce interest rates to fight recessions.
• Supply side: Cut tax rates to boost work effort, savings, and entrepreneurial energy.
• “Rubinomics”: Shrink the budget deficit to promote savings and investment.
• Innovation policy: Boost government spending on education and R&D in order to stoke growth and competitiveness.

— Source: Information Technology and Innovation Foundation